Moscow Exchange's launch of its Blue-Chip Index will incentivise investors to move liquidity from London to the Russian capital, according to a local broker.
The new index, a benchmark to track the performance of the most liquid and highly capitalised securities of 15 Russian issuers, is the latest incentive by the exchange to modernise its market and raise competitiveness.
Sergey Sinkevich, head of international direct market access at Otkritie Capital, the investment banking arm of Russian financial services firm Otkritie Financial said the launch of the Blue-Chip Index was a step in the right direction for the exchange, as it may drive investors to buy Russian shares.
"This is one of the events that the market has been expecting from the Moscow Exchange as it has made a commitment to turn Moscow into the liquidity and price discovery centre for Russian-related securities," he said.
"By putting together a Blue-Chip Index they are trying to feature the best companies that are traded on the Moscow Exchange floor."
However, Tim Bevan, head of prime brokerage at BCS, disagreed, saying the new index made sense, but would do little to move liquidity to the local market.
"Until the market fundamentally becomes more attractive, which we are seeing, the creation of an index in itself isn't really going to accelerate the process."
Bevan said he was "slightly confused" about the amount of indices at the exchange, which was created after the 2011 merger of the country's largest trading venues MICEX and RTS.
"They seem to have overlapping and competing products. I would like to see them do a bit more because otherwise you've got too many competing benchmarks. It's not very clear to the market which way they should go."
New initiatives
In a statement, the Moscow Exchange said the launch of the Blue-Chip Index marked the final phase of the creation of a "unified equity index family". Now, a single approach to building constituent lists of all main indices will be utilised based on stocks' capitalisation, liquidity and free-float, it said.
The Blue-Chip Index methodology complies with both Russian and foreign legal framework, particular requirements of diversification that must be applied to indices in European index funds, the exchange said.
The launch of the new index is the latest in a string of initiatives at the Moscow Exchange. Earlier this year, the exchange also announced it was shifting its settlement period to a T+2 regime from the current cycle of advanced depositing, where the entire sum traded must be deposited before the trade, known as T+0.
T+2 settlement has been available to traders for the 15 most liquid names since March, and it will become the norm for a large number of securities from 1 July. The change will take effect across the board from January 2014.
Sinkevich said the move to T+2 was also important because the T+0 settlement period prevented foreign investors from buying local shares, as the cost of trade was too high compared to London.
Other recent Moscow Exchange reforms include granting Euroclear access to the country's central securities depository to offer post-trade services for liquid government bonds.
Meanwhile, Otkritie has launched the FIX2LSE product by ARQA Technologies, which may be used for direct sponsored access of external software suites to exchange trading platforms. It also executes fast pre-trade checks developed in ARQA’s QUIK Broker system, allowing traders to save on pre-trade checks.
The new product is particularly important for Otkritie as a UK broker regulated by the Financial Conduct Authority. The European Securities and Markets Authority (ESMA) also requires mandatory pre-trade checks and FIX2LSE aims to comply with all ESMA rules.